I believe that you can – and I’d like to share with you 8 tips on how to do that.

HMRC’s resources are stretched meaning that they’re far more likely to investigate where they have reason for suspicion.

This being the case how can you avoid attracting the attention of HMRC?

1. Appoint an accountant – Errors on Tax Returns are one of the most common reasons HMRC has for taking a look at your file. An accountant will significantly reduce the risk of errors.

2. Review your Tax Returns – Ultimately the book stops with you, not your accountant. When you receive your documents for review make sure you give them the due attention.

3. Submit your Returns nice and early – HMRC makes no secret of the fact that it views you as “risky” if you persistently file late returns.

4. Pay your tax on time – same reason as above

5. Keep business expenses sensible – HMRC compares sector averages – it knows how much you should earn before it even receives your Tax Return. Significant deviations from the norm will raise eyebrows. If you’re unsure if a particular expense is legitimate – ask your accountant.

6. Use the “white space” – Your tax return includes a box “Additional Info” (aka “white space”) – use this if you are declaring something out of the ordinary. It may help avoid questions which can lead to an investigation.

7. Beware of easily overlooked omissions – one-off capital gains, interest on savings or small second incomes can easily be forgotten about when it comes time to prepare your Tax Return. But these are not forgotten by HMRC. Since 2010 it uses it’s Connect software to trawl publicly available databases, e.g. Land Registry (provides details of property ownership and transactions), eBay and Airbnb (might give clues of second incomes), even Facebook and other social media websites have become a treasure trove of information to compare life-style with declared earnings.

8. Avoid avoidance schemes – the scheme promoters will tell you that these are legal avoidance of tax, not illegal evasion. However, aggressive schemes such as Employee Benefit Trusts (EBT’s) or Icebreaker (famously used by Gary Barlow) are constantly being shut down by HMRC. Worst of all the participators of these schemes find that some years later the government enacts retrospective tax laws (as controversial as that is) to recover lost tax since the inception of the scheme.

Three months free tax investigation insurance

If the dreaded happens your best defence is your accountant – for between £6 – £10 per month we can insure you against the professional fees incurred in defending your case. Sign-up within 30 days of this post and we’ll give you three months free cover. To better understand our tax investigation insurance please read our blog post Can you insure against a tax investigation?

Enjoy saving tax?

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If you’ve ever received that dreaded letter through the door you’ll know that a tax investigation is costly in at least two ways:

1. A typical investigation results in tax penalties and interest levied on the taxpayer.

2. Your accountant will need to charge for their time spent defending your case.

And that’s not to mention your own time involved in digging-out and providing your historic records.

Whist you can’t insure against HMRC penalties or what they might discover to be unpaid tax you can insure against your accountants’ time in defending your case; ensuring that the final cost of tax and penalties is as low as possible.

Why is Massey Accounting Company now offering fee protection insurance?

Firstly, several recent enquiries from our clients’ prompted us to look at offering this service.

And secondly, let’s face it – the first thing you would do if you received that dreaded letter would be to call your accountant. In our experience tax investigation fees cause strain on our relationship with uninsured clients. I’m sure you understand that no one can work for free. The alternative might be to accept the assertions of HMRC and prematurely settle the enquiry. We would feel much more comfortable having the freedom to defend your case to the hilt!

How much does it cost?

The insurance can be paid monthly or annually in advance. There will be no difference in cost.